Wednesday, March 23, 2016

Where assessee had deducted tax at source from salary paid overseas to its nonresident employees and had deposited the same in Governments account, such payment could not be disallowed merely because tax was not paid within timelimit prescribed under section 200(1).


a) The assessee had claimed deduction in respect of payments made to expatriates pertaining to the assessment of financial year 1990-91 that was still pending.

b) The CIT(A) disallowed such claim under Section 40(a)(iii) on the ground that assessee had failed to deposit TDS within prescribed time-limit under Section 200(1). The ITAT upheld the order of CIT(A). The High Court held in favour of assessee as under :

1) A plain reading of section 40(a)(iii) indicates that no deduction would be allowable in respect of any payments chargeable under the head 'Salaries' if (a) the same are payable outside India, and (b) if tax has not been paid or deducted thereon under Chapter XVII B of the Act.